CA Final – AFM Formula Sheet

❖ Risk Management ❖ Advanced Capital Budgeting 3. Standard Deviation : √𝜎 2 =

Decisions √𝑉𝑎𝑟𝑖𝑎𝑛𝑐𝑒
∑(x−x̅)𝟐 Cash Flow after tax : 4. Coefficient of Variation :
Variance :
n (R-C) × (1-T) + D × T Standard Deviation

where x is observation, n is number Where, Expected Cashflow

of observations and 𝑥̅ is the mean of R is Revenue, C is Cost, T is Tax rate

and D is Depreciation. Conventional Methods of
observations.
Incorporating Risk in Capital
Standard Deviation : σ = 𝐑𝐧 = 𝐑𝐫 ∗ (𝟏 + 𝐏) [ For Absolute] Budgeting:
√Variance Rn is Nominal return,
Rr is Real return, 1. Risk Adjusted Discount Rate
(x−x̅)(y−y
̅) P is Expected Inflation Rate (%). RADR = R f + β(R m − R f ) or
Covariance: ∑ n (1+𝐑𝐧) = (𝟏 + 𝐑𝐫) ∗ (𝟏 + 𝐏) [ For RADR = R f + Risk Premium
Rates]
Cov(X,Y) Where,R 𝑚 is Market return 𝑅𝑓 is
Correlation : ρ = Rn is Nominal rate of return (%)
Risk free rate of return and β is beta
σx σy Rr is Real rate of return (%)
P is Expected Inflation Rate (%).
Where, Cov (X,Y) is covariance 2. Certainty Equivalent
𝐶𝑒𝑟𝑡𝑎𝑖𝑛 𝐶𝑎𝑠ℎ𝑓𝑙𝑜𝑤𝑠
𝜎 is Standard Deviation Statistical Methods of (𝜶):
𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑅𝑖𝑠𝑘𝑦 𝐶𝑎𝑠ℎ𝑓𝑙𝑜𝑤𝑠
Incorporating Risk in Capital
Standard Deviation of portfolio: α × NCF
Budgeting : NPV= ∑ - Initial Investment
(1+k)n
σp = √σ12 + σ22 + (2(σ1 σ2 ρ)) 1. Probability weighted
Where, 𝛼 is Risk Adjustment factor,
Cashflows:
Where 𝜎1 is standard deviation of 1 st NCF is net cash flow without risk
adjustment, K is Risk free rate and n
security and 𝜎2 is standard deviation Expected Value :∑𝑷𝒊 𝑵𝑪𝑭𝒊
is number of periods.
of 2 nd
security in Rupee terms
Where, Pi is the probability and NCFi
Or, Expected Net Present Value
is the Net Cash flows.
(Multiple Periods):
w 2 σ2 + w22 σ22 + ∑(x−x̅)𝟐
√ 1 1 2. Variance : ENPV = Sum of Present Value of
(2(w1 w2 σ1 σ2 ρ)) n
Cashflows calculated Individually –
= ∑𝑷𝒊 (𝒙 − X
̅) 2 Initial Investment
Where w1 & w2 are the weights of
respective securities & SDs are in % Where x is Net cash flow, 𝑥̅ is the Replacement Decision :
Value at Risk (VAR) : expected net cashflow and Pi is the
probability. Step 1: Net Cash flow = Cost of new
σp x Portfolio Value x Cumulative Z Machine – (tax saving + market
Variance as per Hillers Model :
score x √N Days value of old machine)
[usually a negative value]
𝝈𝟐 = ∑(1 + 𝑟)-2i 𝜎2i
Where, Z score indicates how many
standard deviation away from mean Where, Step 2: (Change in Sales +/- Change
in Operating Cost – Change in
Market Capitalisation: Total 1+r is the discount rate and i is the
Depreciation) × (1- Tax) + Change in
number of shares × Market price of time period.
Depreciation Or
share
 (Change in Sales +/- Change in EMA t = aPt + (1-a) (EMAt-1) 2n = Maturity period expressed in
Operating Cost ) ×(1- Tax) + (Change terms of half-yearly periods; C/2 =
2
in Depreciation × Tax) Where, a(exponent) = Semi-annual coupon; y/2 = Discount
n+1
rate applicable for half-year period
Step 3: Present Value of Cashflows N Is number of days, Pt is price of
today and EMAt-1 is previous day Bond Basic Value (between 2
= Present Value of Yearly Cash Flows
EMA. coupon dates) :
+ Present Value of Salvage
For Run tests, Present Value of (A + Coupon)
Step 4: NPV = Step 1 [cash outflow − Accrued Interest
2n1n2
i.e -ve value ] + Step 3 [ cash inflow Mean = + 1,
i.e +ve value]
n1+n2 Where,
where n1 and n2 are sign changes, A = Bond price calculated as on next
Optimum Replacement Cycle : coupon date after payment of
Variance = coupon
Equivalent Annual Cost (EAC) = 2n1n2 (2n1n2−n1−n2)
Present Value of Cash Outflow (PVCF) Present value of (A + Coupon)
(n1+n2)(n1+n2) (n1+n2−1) A + Coupon
Present Value Annuity Factor( PVAF) =
Req. YTM Time until next coupon

Number of runs : Runs lies between (1 + ) Total coupon period

No. of periods
Adjusted Present Value : μ ± t(σ) , where
Base Case NPV (on unlevered cost t is distribution with degree of
of capital) + PV of tax benefits on freedom (DoF) & DoF – Number of Accrued Interest
interest Runs – 1 Coupon rate
= Face Value x x
Profitability Index = No. of periods
❖ Valuation of Debentures
Discount Cash inflow
Initial Investment
and Bonds Time elapsed
Total coupon period
Bond Value :
❖ Security Analysis Current Yield:
Coupon
n
C M Current market price
Gordon’s Dividend Growth Model : P0 = ∑ t
+
(1 + y) (1 + y)n Yield To Maturity (YTM) :
t=1
D1 Or,
Current Stock Price(P) = NPV at LR
k−g LR + NPV at LR −NPV at HR x (HR − LR)
P0 = C (PVIFA y, n) + M (PVIF y, n)
Where, Where, Where,
D1 is value of next year dividend, P0 = Bond price; n = Maturity period; LR = Lower Rate; HR = Higher Rate
k is the minimum rate of return, C = Coupon; y = YTM; M = Maturity
g is growth rate of dividend. value
YTM (Approximate Formula) :
Current Market Price
PE Multiple : Alternate Formula : (F−P)
Earnings per share C±
n
Confidence Index : C 1 M F+P
Po = x [1 − n
]+ 2
y (1 + y) (1 + y)n
Avg yield on high grade bond
Where,
Avg yield on low grade bond Bond value (when coupon
payments are semi-annual) : C is coupon, F is face value, P is
Arithmetic Moving Average : 2n C market price of bond/issue Price, n is
2 M years to maturity
AMA n, t = 1/n [Pt + Pt-1+ … + Pt-(n-1)] Po = ∑ y t +
y 2n
t=1 (1 + 2) (1 + 2)
Where, Yield To Call :
N is number of total periods and t is n
C Call price
period. Po = ∑ t
+
(1 + y) (1 + y)n
t=1
Exponential Moving Average: Where,
Where y is Yield to Call and n is Call Where, V+ is Price of Bond if yield 100 − Initial Margin
period increases by Δy 100
V– = Price of Bond if yield decreases
Yield To Put : Repayment at Maturity in Repo
by Δy
n
C Put price V0 = Initial Price of bond; Δy = Change Start Proceeds x (1
Po = ∑ + in Yield No, of days
(1 + y)t (1 + y)𝑛 + Repo Rate x )
t=1 360
Alternate Formula:
Where y is Yield to Put and n is Put
period t(t + 1)C n(n + 1)M ❖ Valuation Equities
∑nt=1 +
(1 + y)n+2 (1 + y)n+2
Macaulay Duration : P Expected Return :

txc nxM (Rx) = Rf + βx (Rm - Rf)

∑nt=1 t +
(1 + i) (1 + i)n
In simple terms, Where,
P
Rx is expected return on equity
1
Where, t is Time; c is Coupon; I is Convexity = Rf is risk-free rate of return
P (1 + y)2
Interest rate; P is Principal; n is n βx is beta of "x"
CFt x t x (t + 1)
Maturity and M is Maturity value + ∑ Rm is expected return of market
(1 + y)t
t=1
Or
Equity Risk Premium :
1+y (1 + y) + t(c − y) (Rx -Rf ) = βx (Rm - Rf)
− Conversion Value of Debenture :
𝑦 C((1 + y)t − 1) + y
Price per equity share x Converted
Where, Y is yield to maturity no. of shares per debenture Equity Valuation for a holding
period of one year
Modified Duration: Value of Warrant : (MP – E) x n
Where, P0 = D1+1+KP1
Macaulay Duration e
=− MP is Current Market Price of Share
YTM
(1 + ) E is Exercise Price of Warrant Where,
n
Where, n is No. of equity shares convertible 𝐷1 – Dividend at the end of year 1, 𝑃1 -
YTM is Yield to Maturity; n is Number with one warrant Price at the end of Year 1 & 𝐾𝑒 – Cost
of compounding periods per year of Equity.
Or, Yield on Treasury Bills:
C FV − Issue Price 365 Valuation of Equity – Zero Growth
n x (M − y) x
C 1 Issue Price Maturity D
(1 − )+ P0 =K
y2 (1 + y)n (1 + y)n+1
e
P Yield on Commercial Bills/
Where, D is Dividend at the end of year
Convexity adjustment: Certificate of Deposit/ Commercial
1.
Paper:
Δy2
C* x x 100 FV − Sale Value 365
2 Valuation of Equity – Constant
x
Sale Value Maturity Growth
Where,
D
1
C* is Convexity formula; Δy is Change Dirty Price = Clean Price + Accrued P0 = 𝐾 −𝑔
in yield for which calculation is done Interest 𝑒

Where, D1 = D0 (1+g), g is growth rate

Start Proceeds in Repo
V+ +V− −2V0
Convexity Formula : Valuation of Equity – Two Stage
V0 (Δy)2 Dirty Price
Nominal Value x x Growth
100
 D0 (1+g1 ) D0 (1+g1 )2 Where, E is earning per share and D is ̅ is Expected Return
X
P0 = [ + + ……. dividend per share for the just
(1+Ke ) (1+ke )2 Variance :
D0 (1+g1 )n Pn concluded year
+ ]+ n
(1+ke ) n (1+ke )n PE or Multiple Approach
(σ2 ) = ∑ (X i − ̅
X)2 . p(X i )
D0 (1+g1 )n (1+g2 ) Value of an Equity Share = EPS X PE i=1
Pn =
(Ke − g2 ) Ratio 2
Where, σ is Variance
Enterprise Value (EV)
Where, Standard Deviation :
D0 is Dividend Just Paid, FCFF
EV = ∑n ̅ 2
i=1 (Xi −X)
g1 is Finite or Super Growth Rate K−g SD = √variance = √σ2 = √
n
g2 is Normal Growth Rate
Where,
Ke is Req. Rate of Return on Equity Covariance :
FCFF is Free cash flow to firm
Pn is Price of share at the end of Super
k is Weighted Average cost of Capital n
Growth. ̅) (Yi − Y
Cov (X, Y) = ∑(Xi − X ̅) /n
g is Growth rate
I=1

H Model Theoretical Ex-Right Price (TERP) Where,

t
D0 X 2 X (gs − gL ) D0 (1+gL ) nP0 +S X is security 1
P0 = + TERP = X is Mean of security 1
̅
(Ke − gL ) (Ke − gL ) n+ n1
Y is security 2
Where, Where, ̅ is Mean of security 2
Y
gs is super normal growth rate n is Number of existing equity shares, n is no. of observations
gL is normal growth P0 is Price of Share Pre-Right Issue,
t is time period S is Subscription amount raised from
Right Issue & Correlation Coefficient
n1 is No. of new shares offered Cov(X, Y)
Gordon’s Model (Earnings rXY =
Approach) Value of Right σX . σY
TERP− S
EPS1 (1−𝑏) Value = Where,
P0 = n
𝜎𝑋 is standard deviation of X
(Ke − br )
Value of Preference Share : 𝜎𝑌 is standard deviation of Y
Where, D1 D2 Dn +Maturity Value
P0 is Price per share (1+r)1
+ (1+r)2
+ …… + (1+r)n
b is Retention ratio Beta Under Correlation Method
r is Return on Equity Where,
rim σi Cov(i,m)
br is Growth Rate (g) D1 is Dividend at the end of Year 1 β= Or
σm (σm )2
D2 is Dividend at the end of Year 2
Gordon’s Model (Dividend Dn is Dividend at the end of Year n Where,
Approach) r – Cost of Preference Shares 𝛽 is Beta (degree of dependency of
D1 returns / ri
P0 = ❖ Portfolio Management 𝜎𝑖 – standard deviation of Individual
(Ke − br )
Where, Expected Return : security return
D1 is dividend at the end of yr 1 n
𝜎𝑚 is standard deviation of market
̅) = ∑ Xi p(Xi )
(X return
i=1
Walter’s Model r is correlation of individual security
r
D0 + (E−D) return (i) and market return (m)
Ke
P0 = Where,
(Ke )
𝑋𝑖 is Possible Returns of a security, Beta Under Regression Method
P (X i ) is Related probability &
 (n ∑ xy − ∑ x ∑ y) Expected return of the portfolio
β=
n ∑ x 2 − (∑ x)2 when r is 0, (σp ) (using CML):
Or,
= √w12 . (σ1 )2 + w22 (σ2 )2 Rm − Rf
∑ xy − nx̅y̅ E(R p) = R f + ( ) . σp
σm
β= when r is + 1, (σp ) = (𝑤1 𝜎1 + 𝑤2 𝜎2 )
∑ x 2 − nx̅ 2
when r is − 1, (σp ) = (𝑤1 𝜎1 − 𝑤2 𝜎2 ) Where, σp is Portfolio risk
where,
Expected return of the portfolio
𝑥 is independent market return Covariance : (using CAPM):
𝑦 is dependent stock return
Cov(x, y) = rxy . σx σy E(R) = R f + β(R m − R f )
Beta (Slope of line) : Where, Expected return of the stock –
𝑦 = α + βx Sharpe Model :
𝑟𝑥𝑦 – correlation between x and y
Where, R i = αi + βi R m +∈i
Standard Deviation of portfolio :
𝛼 − alpha, intercept value Where,
n n
𝛽 −Beta, Slope of the line 𝑅𝑖 is Expected return on a security i
σp 2 = ∑ ∑ xi xj . rij . σi . σj
𝛼𝑖 is intercept of the straight line or
Portfolio Return : i=1 j=1
alpha co-efficient
Or,
𝛽𝑖 is slope of straight line or beta co-
E(R)p = ∑ R i wi n n
efficient
2
σp = ∑ ∑ xi xj . σij 𝑅𝑚 is rate of return on market index
Where,
i=1 j=1
𝐸(𝑅)𝑝 is Portfolio Return 𝜖𝑖 is error term
Where,
𝑅𝑖 is Return on Stock 𝑥𝑖 : weightage of security 1 in portfolio Expected risk of the stock – Sharpe
𝑤𝑖 is Weightage of stock in the 𝑥𝑗 : weightage of security 2 in portfolio Model :
portfolio 𝑟𝑖𝑗 is correlation between security 1
(σi )2 = (βi )2 . (σm )2 + (σϵi )2
and 2
Portfolio Risk:
2
Where,
(σp)2 = wi2 . (σi )2 + wj2 . (σj )
Variance of portfolio for 3
+ 2σi σj rij wi wj (𝜎𝑖 )2 is variance of the security
Securities :
𝛽𝑖 is slope of straight line or beta co-
σ2 = [2σy σz wy wz ryz ] + efficient
2
= wi2 . (σi )2 + wj2 . (σj ) [2σx σy wx wy rxy ] + [2σx σz wx wz rxz ] + (𝜎 )2 is market variance
𝑚
2 2
+ 2Cov(𝑖, 𝑗)wi wj [(σx )2 (wx )2 + (σy ) (wy ) + 2
(𝜎𝜖𝑖 ) is Variance of errors
(σz ) (wz ) ]
2 2
Where, Covariance between securities –
i is security 1 & j is security 2 Where, x, y & z are Security 1, 2 & 3 Sharpe Model :
𝜎𝑝 is Portfolio risk respectively
(σij ) = (βi ) . (βj ) (σm )2
(𝜎𝑝)2 is Portfolio variance
Slope of Capital Market Line (CML):
𝜎𝑖 is Standard deviation of security 1
𝜎𝑗 is Standard deviation of security 2 Rm − Rf Risk (SD) of portfolio – Sharpe
𝑤𝑖 is Weight of security 1 in portfolio σm Model:
2
𝑤𝑗 is Weight of security 2 in portfolio Where, 2
n

𝑟𝑖𝑗 is correlation between security 1 R 𝑚 is Market return (σp ) = [∑ xi βi ] . (σm )2

and 2 𝑅𝑓 is Risk free rate of return i−1

Portfolio Risk with different 𝜎𝑚 is Market risk (SD of market) n

2
correlation coefficient : Slope is reward per unit of risk borne + [∑(x i )2 (σϵi ) ]
i−1
Return of the portfolio – Sharpe Market value of Investments +
Model: Receivables + Other accrued income
Relationship of weight of securities
n + Other assets – Accrued expenses –
in Minimum Variance Portfolio :
E = ∑ xi (αi + βi R m ) Other payables – Other liabilities
i−1 𝑊𝐵 = 1−𝑊𝐴
Tracking Error (TE) :
Sharpe ‘s Optimal Portfolio :
Alpha of the portfolio : ̅ 2
Calculation of cutoff point (C*):
√∑(d−d)
n n−1
n Where,
αp = ∑ xi αi 2
(R i − R f )βi d is Differential return
σm . ∑
i=1 σei 2 d’ or d̅ is Average differential return
i=1
Where, n = No. of observation
𝒏
βi 2
𝑥𝑖 is weightage of ‘x’ security in 1 + σm 2
∑ 2
σei ❖ Derivative Analysis and
portfolio 𝒊=𝟏
𝛼𝑖 is intercept of the straight line or Valuation – Futures
Highest C value is taken as cut off
alpha co-efficient
point (C*) Basis : Spot Price – Futures Price
Beta of the portfolio:
Calculation of weights : Annual Compounding :
n
A = P(1+r/100)t
βp = ∑ wi βi Zi
Where,
i=1 n A is Compounded amount,P is
∑ zi Principal amount,r is Rate of interest
i=1 & t is Time period
Expected return using SML :
β Ri −R0
Rm − Rf Where, Zi = [ × C∗ ] Interval Compounding :
σ2ei βi
ER = R f + σim [ (σ )2 ] A = P(1+r/n)nt
m 2
𝜎𝑚 𝑖𝑠 Variance of the market Where, n is no of intervals
Expected return – Arbitrage Pricing
Σei 2 is Stock’s unsystematic risk Continous Compounding :
theory : ER = R f + λ1 β1 +
λ2 β2 … λn βn Or, R𝑝 −Rf P x ert = X
Sharpe Ratio: S = Where,
σi
ER = R f + (AV1 − EV1 )β1 e is Epsilon and X is Future Value
+ (AV2 Rp −Rf
Treynor Ratio: T =
− EV2 ) β2 … … (AVn βi Futures Price :
− EVn )βn
Jensen Alpha : Alpha(α) = A(R) − F = S x e(r-y)t
Where, λ 𝑖𝑠 Risk premium for the E(R) = R p − (R f − β(R m − R f )) Where,
factors like GDP, inflation, interest F is Future Value ,S is Spot Value & y is
Where, Jensen’s Alpha is α Dividend Yield
rate, etc
A(R) is Actual return
(𝐴𝑉𝑛 − 𝐸𝑉𝑛 ) – Surprise Factor due to Contract Value : Lots size × Futures
change in Value of Factor E(R) is Expected Return as per CAPM Price

Weight to achieve Minimum Δ in value of stock

❖ Mutual Funds Beta :
Variance Portfolio : Δ in value of INDEX
NAV per unit :
[ σB 2 − rAB σA σB ] Value of futures contracts to be
WA = 2 Net Assets of the Scheme)/(No. of
σA + σB 2 − 2rAB σA σB hedged : Portfolio Value x Beta of
units outstanding) Where,
the portfolio
net assets of the scheme =
❖ Derivative Analysis and d=
Sd
S0
Valuation - Options Forward Premium % =
Forward Premium
Sd is spot going down x 100
Long call payoff : Max (0, (ST – X)) Spot Rate
Where,
Present Value :
ST – Spot price at Maturity Date (P) x (u)+(1−P) x (d) Forward Premium (Annualised) :
X – Strike Price ert Forward Premia 12
x x 100
Spot Rate Given Period
Short call payoff : Min((X – ST), 0) Black Scholes Merton Method

Long put payoff : Max(0, (X - ST)) C = S0 e-yt N(d1) – K e-rt N(d2)

Forward Rate as per Covered
Short put payoff : Min((ST - X), 0)) S0 σ2
ln( )+(r−y+ )T Interest Parity :
K 2
d1 =
σ√T = Current spot rate (Direct Q) x
Delta (Δ):
Change in the price of the option 1+ Current domestic interest rate
d2 = d1 – σ√T
Change in the price of the stock 1+ Interest rate of foreign market

y = dividend yield Expected Future Spot Rate as per

Gamma (ɣ):
Change in the price of the option Uncovered Interest Parity:
where, C is Call Value , S0 is Spot = Current spot rate (Direct Q) x
Change in delta
N(d1) - hedge ratio of shares of 1 + Current domestic interest rate
Theta (θ) : 1 + Interest rate of foreign market
stock to Options.
Change in the price of the option
Change in time period Purchasing Power Parity (Absolute
K e-rt N(d2) – borrowing equivalent Form) :
to PV of the exercise price times an
Vega (V) :
adjustment factor of N(d2) Spot Rate
Change in the price of the option Price level in domestic market
Change in Volatility =αx
Futures price of Commodity : Price level in foreign market

Rho (ρ): Where,

Change in the price of the option (S0) x e(r+s-c)t α = Sectoral constant for adjustment
Change in Interest rate
Where, Purchasing Power Parity (Relative
Put Call Parity : S0 is Spot price Form) :
C + (K x e-rt) = P + S0 r is Rate of interest
Expected Spot Rate =
Where, s is Storage cost Current Spot Rate (Direct Q) x
C is Value of call c is convenience yield 1+Domestic Inflation Rate
K is Strike price t is time. 1+ Foreign Inflation Rate
e-rt is Present Value
❖ Foreign Exposure and Risk International Fisher Effect :
P is Value of Put
Management Expected Spot Rate
=
S0 is Spot price Current Spot Rate
Binomial Model : Relationship between direct and 1+ Domestic interest rate
1+Interest rate in Foreign market
ert −d indirect quote:
Probability : p =
u−d Direct Quote = 1/(Indirect Quote) ❖ Intl. Financial Management
Where,
Su Modified IRR i.e MIRR =
u= % Spread =
Ask−Bid
x 100
S0 n FV (Positive Cash Flows, Reinvestment rate)
Bid √
Su is spot going up & S0 is current −PV (Negative cash Flows, Finance rate)

spot -1
Forward Rate = Spot Rate ± Where, n is project life in years.
Premium/Discount
𝐀𝐏𝐕 = −I0 + ∑nt=1 (1+K)
t
+
X Interest Rate Collar : WACC = Weighted Average Cost of
t
Payment = (N)[max(0, R A − Capital
Tt S
∑nt=1 + ∑nt=1 (1+it dt
R C ) − max(0, R F − R A )]. Days in year Invested Capital = Total Assets
(1+id )t d)
t
minus Non-Interest-Bearing
Where, Liabilities
Interest Rate Swaps :
I0 is Present Value of Investment d
Note: Adjust. EBIT and Invested Capital
t
Rate Payment = N. (AIC). 360 for non-cash charges (other than
Outlay
Xt Where, depreciation) like provisions for doubtful
is present value of operating debts, P&L adjustments.
(1+K)t N is notional principal amount of
cash flow the agreement,
Tt Market Value Added (MVA):
is present value of Interest Tax AIC is All In Cost (Interest rate –
(1+id )t MVA = MV of E & D – Invested
fixed or floating)
shields Capital
St dt is number of days from the
is present value of Interest ❖ Miscellaneous
(1+id )t interest rate to the settlement date
subsidies ❖ Business Valuation Steps to compute 10th root of a
❖ Int. Rate Risk Management E number
Beta of Assets : βa = βe [ ]+
Settlement amount on FRA E+D(1−t)
dtm D
βd [E+D(1−t)] 1. Write the number on your
N(RR−FR)( )
DY calculator
dtm Where,
[1+RR(
DY
)] 2. Press the square root button 12
𝛽𝑎 − Ungeared or Asset Beta
times
Where, 𝛽𝑒 – Geared or Equity Beta
3. Subtract 1
N is notional principal amount 𝛽𝑑 – Debt Beta
4. Divide by n, where n is the nth
RR is Reference Rate prevailing on E – Equity
root = 10 or multiply with 1/10
the contract settlement date D is Debt
5. Add 1
FR is Agreed-upon Forward Rate t is Tax rate
6. Press “multiply button and then
dtm is days of loan (FRA Specified P/E to Growth Ratio:
equal to button” 12 times
PE Ratio
period) PEG Ratio = g x 100
E power value on calculator – e
DY is Total number of days (360 or Where,
power (0.16)
365 days) P is Market Price per share
Interest Rate Cap = E is Earnings per share 1. Write the number on your
dt
(N) max(0, R A − R C ) . Days in year g is Growth rate of EPS calculator 0.16
Enterprise Value: 2. Divided by 4096
Where,
EV = MC + D − C 3. Add 1
N is notional principal amount of the
Where, 4. X = 12 times
agreement,
MC is Market capitalization, 5. Final answer – 1.173507
𝑅𝐴 is actual spot rate on the reset
date D is debt and C is Total Cash
Equivalents. Computation of Natural Log on a
𝑅𝐶 is cap rate (expressed as a
Economic Value Added: EVA = Normal Calculator
decimal)
NOPAT − Capital Charge = Eg: Log 1.088235
dt is the number of days from the
EBIT (1 − tax rate) − Square root 1.088235 → 15 times
interest rate reset date to the
Invested Capital ∗ WACC Subtract 1
payment date
Divide by 0.000070271
Interest Rate Floor Where,
Get the log value
dt NOPAT = Net Operating Profit After
=(N) max(0, R F − R A ) . Days in year 0.084557
Taxes
EBIT = Earnings before Interest and
Tax
 CUMULATIVE STANDARD NORMAL DISTRIBUTION TABLE
Z 0 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09
- 0.5000 0.5040 0.5080 0.0120 0.0160 0.0199 0.5239 0.0279 0.0319 0.0359
0.10 0.5398 0.5438 0.5478 0.5517 0.5557 0.5596 0.5636 0.5675 0.5714 0.5753
0.20 0.5793 0.5832 0.5871 0.5910 0.5948 0.5987 0.6064 0.1064 0.6103 0.6141
0.30 0.6179 0.6217 0.6255 0.6293 0.6331 0.6368 0.6406 0.6443 0.6480 0.6517
0.40 0.6554 0.6591 0.6628 0.6664 0.6700 0.6736 0.6772 0.6808 0.6844 0.6879
0.50 0.6915 0.6950 0.6985 0.7019 0.7054 0.7088 0.7123 0.7157 0.7190 0.7224
0.60 0.7257 0.7291 0.7324 0.7357 0.7389 0.7422 0.7454 0.7486 0.7517 0.7549
0.70 0.7580 0.7611 0.7642 0.7673 0.7704 0.7734 0.7764 0.7794 0.7823 0.7852
0.80 0.7881 0.7910 0.7939 0.7967 0.7995 0.8023 0.8051 0.8078 0.8106 0.8133
0.90 0.8159 0.8186 0.8212 0.8238 0.8264 0.8289 0.8315 0.8340 0.8365 0.8389
1.00 0.8413 0.8438 0.8461 0.8485 0.8508 0.8531 0.8554 0.8577 0.8599 0.8621
1.10 0.8643 0.8665 0.8686 0.8708 0.8729 0.8749 0.8770 0.8790 0.8810 0.8830
1.20 0.8849 0.8869 0.8888 0.8907 0.8925 0.8944 0.8962 0.8980 0.8997 0.9015
1.30 0.9032 0.9049 0.9066 0.9082 0.9099 0.9115 0.9131 0.9147 0.9162 0.9177
1.40 0.9192 0.9207 0.9222 0.9236 0.9251 0.9265 0.9279 0.9292 0.9306 0.9319
1.50 0.9332 0.9345 0.9357 0.9370 0.9382 0.9394 0.9406 0.9418 0.9429 0.9441
1.60 0.9452 0.9463 0.9474 0.9484 0.9495 0.9505 0.9515 0.9525 0.9535 0.9545
1.70 0.9554 0.9564 0.9573 0.9582 0.9591 0.9599 0.9608 0.9616 0.9625 0.9633
1.80 0.9641 0.9649 0.9656 0.9664 0.9671 0.9678 0.9686 0.9693 0.9699 0.9706
1.90 0.9713 0.9719 0.9726 0.9732 0.9738 0.9744 0.9750 0.9756 0.9761 0.9767
2.00 0.9772 0.9778 0.9783 0.9788 0.9793 0.9798 0.9803 0.9808 0.9812 0.9817
2.10 0.9821 0.9826 0.9830 0.9834 0.9838 0.9842 0.9846 0.9850 0.9854 0.9857
2.20 0.9861 0.9864 0.9868 0.9871 0.9875 0.9878 0.9881 0.9884 0.9887 0.9890
2.30 0.9893 0.9896 0.9898 0.9901 0.9904 0.9906 0.9909 0.9911 0.9913 0.9916
2.40 0.9918 0.9920 0.9922 0.9925 0.9927 0.9929 0.9931 0.9932 0.9934 0.9936
2.50 0.9938 0.9940 0.9941 0.9943 0.9945 0.9946 0.9948 0.9949 0.9951 0.9952
2.60 0.9953 0.9955 0.9956 0.9957 0.9959 0.9960 0.9961 0.9962 0.9963 0.9964
2.70 0.9965 0.9966 0.9967 0.9968 0.9969 0.9970 0.9971 0.9972 0.9973 0.9974
2.80 0.9974 0.9975 0.9976 0.9977 0.9977 0.9978 0.9979 0.9979 0.9980 0.9981
2.90 0.9981 0.9982 0.9982 0.9983 0.9984 0.9984 0.9985 0.9985 0.9986 0.9986
3.00 0.9987 0.9987 0.9987 0.9988 0.9988 0.9989 0.9989 0.9989 0.9990 0.9990

1.645 – 95.0% of cumulative area from left – Lower limit of right 5% Tail
1.960 – 97.5% of cumulative area from left – Lower limit of right 2.5% Tail
2.326 – 99.0% of cumulative area from left – Lower limit of right 1% Tail
2.576 – 99.5% of cumulative area from left – Lower limit of right 0.5% Tail
3.090- 99.9% of cumulative area from left – Lower limit of right 0.1% Tail
3.291- 99.95% of cumulative area from left – Lower limit of right 0.05% Tail

Area under normal curve ( Both tails)

1 SD on either side – 68.26% of area under the curve is covered
2 SD on either side – 95.44% of area under the curve is covered
3 SD on either side – 99.73% of area under the curve is covered

1.645 SD on either side – 90% of are under curve is covered

1.960 SD on either side – 95% of are under curve is covered
2.576 SD on either side – 99% of are under curve is covered
T - DISTRIBUTION TABLE
COMMON LOGARITHM TABLE(Base 10)
COMMON ANTI LOGARITHM TABLE (Base 10)
Natural Logarithm Table (base e)